By Dashan Hendricks
Are Jamaica's plans to create a logistics-centred economy too elaborate? Or, is it too little too late? These are questions I have struggled with for a while.
In Jamaica today it seems every attempt by a corporation to improve its route-to-market strategy is described as part of the logistics-centred economy. But, the real centre of any such attempt, the transportation system, remains woefully inadequate to accommodate such a reality.
The obvious point of reference on the transport matter is the port system, both air and sea ports. While Kingston has the world's seventh largest natural harbour, the presence of silt means the larger ships, called post Panamax ships, which will carry over 12,000 Twenty Foot Equivalent (TEU) containers, cannot be accommodated and may not be accommodated. That last assessment is based on word from Omar Davies, the Minister of Transport, that the new concessionaires are not in a hurry to dredge the harbor to overcome that difficulty.
But, the ports aside, it must be considered whether global warming may mean the Panama Canal may not see as much traffic as anticipated over the next few decades.
During the week of January 18, 2016, world leaders meeting at the World Economic Forum in Davos, Switzerland, were told of the discovery of a trillion dollar ocean. That comes about as the resources of the Arctic Ocean are now more accessible with global warming; meaning more and more of the ice cover is melted in summer.
That opportunity will be exploited by Arctic countries, such as Canada, Russia, USA, Iceland, Denmark, Norway and Sweden, and it may well affect our plans to create a global transshipment hub.
The leaders at Davos were told that melting ice in the Arctic means that in summer months, cargo can travel a shorter distance from East Asia to New York. Currently, from, say, South Korea, a ship travels 12,000km to pass through the Panama Canal to New York. If the route of the Arctic Ocean is available, due to global warming, that distance falls to 5,000km.
Companies looking on can then plan most of their shipments around summer. For example, what would it take for Japan’s Toyota to plan most of its vehicle shipments in the summer? An executive could easily sit down with his management team, forecast the demand for his products and ship most of them in the summer through the Arctic Ocean. The shorter distance means less will be spent on fuel, less on salaries, less on maintenance since the ships will be at sea less and so on. They could easily set up logistics facilities in warm water ports along the U.S. eastern seaboard, store excess goods there, and take from stock when necessary to meet demand. That's the same concept being discussed with Jamaica's logistics hub; companies can store excess goods in Jamaica and ship to markets in the United States on a close-to, just-in-time schedule. Except that, when the Arctic Ocean melts, the ships no longer need to pass Jamaica on their way from the Panama Canal. They would use the shorter route.
All of a sudden then, the “location, location, location” issue being touted as Jamaica's staging ground, no longer looks as attractive. It means that, as a country, we must be careful to diversify our economy sufficiently, so that if companies in Asia choose the short route to market through the Arctic Ocean, we are not left to feel like a town that was thriving, having been on the railroad route, only to become deserted after the roads were built.
Dashan Hendricks is RJR's Group Business Editor